Cigarette company’s  empire up in smoke

Business Reporter

PACIFIC Cigarette Company (PCC) has been granted its request to be placed under voluntary business rescue after an assessment by revenue authorities alleged tax violations and outstanding obligations that left the company facing liability amounting to US$19,3 million and $79,8 billion.

The company, formerly Savanna Tobacco Company, said the tax liability also plunged the company into an insolvent position.

PCC said the financial mess the company finds itself in had its roots in the foreign currency challenges faced by the country in 2005 when the company entered into a partnership with the Reserve Bank of Zimbabwe (RBZ) and piloted toll manufacturing to survive the introduction of the 50 percent foreign currency surrender requirements on exports.

The cigarette maker said the foreign currency surrender policy threatened the survival and viability of many businesses and livelihoods in Zimbabwe.

“Through toll manufacturing, PCC and other businesses were able to source raw materials from their customers, ensuring their sustainability, while complying with the RBZ’s 50 percent foreign currency surrender requirements.

“The then Reserve Bank governor promoted toll manufacturing as a durable business model for companies facing similar foreign currency challenges.

“Since then, the toll manufacturing model has been our accepted raw material funding model, removing the need for PCC to finance the working capital for export raw materials.

“In June this year, without any notice, Zimra performed a spectacular U-turn that has undermined the stability of the business and deemed the raw materials funded by our customers as income, subject to VAT,” said PCC.

“They also levied an arbitrary markup and interest and penalties on PCC for the tax assessment period 2018 to 2020, to which we have objected.

“The issued tax assessments against the company impose tax liabilities amounting to US$19,3 million and $79,8 billion.”

PCC, which is Africa’s second-largest indigenous tobacco company and Zimbabwe’s first locally-owned cigarette company, alleges that Zimra garnished all its bank accounts.

“Next, Zimra took the unprecedented step of instructing our customers to pay Zimra any monies owed to PCC, effectively closing off all the company’s income streams.

“In an effort to get the garnish lifted, PCC submitted a payment plan proposal while awaiting the determination of the objection which payment plan was rejected by the tax authority,” said the cigarette manufacturer.

At law, PCC said it has an obligation to pay the assessed taxes despite challenging the tax assessments.

“Zimra’s unprecedented actions on false tax violations have regrettably placed PCC in an insolvent position, forcing the company’s directors to place the business under voluntary business rescue to safeguard the interests of all creditors and stakeholders, whilst the company continues to try and amicably resolve the matter with the tax authority.

“PCC applied to be placed under voluntary business rescue on the October 2, 2023 and the Master of the High Court October 4, 2023 appointed Mr Reuben Mukavhi of Rubaya-Chinuwo Law Chambers Legal Practitioners as the corporate business rescue practitioner,” it said.

Through its world-class manufacturing capability and innovation, PCC directly and indirectly, supports hundreds and thousands of livelihoods in Zimbabwe.

PCC said it is a company founded on strong entrepreneurial principles and with an unambiguous commitment to the development of Zimbabwe and its people, and thus as an ethical corporate citizen, it remains steadfast in its dedication to sustaining jobs and serving customers, among others.

Against this background, the cigarette producer said it was committed to working with the tax authority to find an amicable solution to their impasse with Zimra.

Contacted for comment, Zimra head of corporate affairs Mr Francis Chimanda said his organisation does not comment in the public domain the tax affairs of an individual taxpayer.

“The Zimbabwe Revenue Authority is not in a position to comment in the public domain on the tax affairs of an individual taxpayer as the law through the Preservation of secrecy protects clients’ right to confidentiality,” it said.

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